Future Capital seeks a more certain future

August 2, 2010

Future Capital, the ailing retail financing venture of Kishore Biyani, is making another go at leveraging its large customer base to sell retail finance products and services

Three years after he launched Future Capital Holdings (FCH), Kishore Biyani (founder of Big Baazar chain of retail stores), has found another leader to make a go of his ailing consumer financing business. He has now roped in V Vaidyanathan, currently CEO of ICICI Prudential Life, who was considered a rising star in the ICICI group to organise and grow the retail finance and insurance business that come under the Future brand. According to informed sources, Vaidyanathan will get a significant stake in Future Capital in return for his efforts to grow the business into a large retail finance company straddling every major customer-facing businesses.

Future Capital made a public issue January 2008, at the very peak of the biggest bull market India has seen. The stock hit a high of Rs1190 in February 2008 and collapsed to a low Rs93 in March 2009, a crash of 92%. It is currently trading at around Rs250. When it made the IPO, many smart investors had very high hopes about the company given that it was headed by Sameer Sain, a hotshot from Goldman Sachs. Mr Sain was a managing director with Goldman Sachs and head of the special investments group, co-head of wealth management for Europe, the Middle-East and Africa, and a member of the executive committee of Goldman Sachs Bank Zurich. However, it transpired that Sain was keener on the private equity part of the business and not the retail financing part for which Future Capital was mainly set up.

For Vaidyanthan it will be a different kind of assignment altogether after a decade with the ICICI group. He will take a significant stake in the company and grow it like an entrepreneur. The Future group is into the life and general insurance businesses in a tie up with Generali and some retail financial products and services. Vaidyanathan’s first job will be to make them cohesive so that there is tight supervision across these businesses. He will be the CEO overseeing the entire gamut of financial services - broking, wealth management, retail financing and insurance etc. - not only as a key manager but as a co-promoter as well. Future Capital has Rs800 crores of equity and little loans.

According to sources close to Future group, Vaidyanathan has excellent relationships with top business leaders and peers due to his long stint with the second largest bank in the country. He would like to leverage that, create value and share the upside. The new move is different but no less challenging than his current assignment as the head of ICICI Prudential Life where he has to deal with frequent and very public changes brought about by the regulator.

Future Capital will have a business leader in place, six months after Sain moved out of the CEO’s role. “Sain is very comfortable with private equity. His world was not about consumer and consumption. He had all the capital but could not build a business, especially since the macro environment turned turbulent just after the public issue” says an insider. On the other hand, Vaidyanathan comes from the retail banking side with a strong track record of understanding the Indian consumer. Biyani himself less comfortable about retail financing even though he has a great sense of what the retail consumer wants and how to deliver it. This is a gap that Vaidyanathan will fill.

As originally planned, FCH was supposed to be Kishore Biyani’s dream financial vehicle to extract value from footfalls into Pantaloon stores. Instead, in February, he decided to split its business into financial services retailing and investment advisory. Sameer Sain stepped down from his position as chief executive and managing director of the company.

FCH was supposed to have multiple revenue streams. Apart from selling insurance, consumer loans, credit cards and wealth management services, it is an adviser to various offshore and private equity funds. FCH manages four funds under its real-estate advisory services. FCH’s retail financial services started in June 2007 with an agreement with Pantaloon Retail India Ltd (PRIL), under which FCH has exclusive right to provide financial products and services at present and future malls, stores and retail outlets in India which are owned, controlled or managed by PRIL and its subsidiaries. FCH’s private equity arm, Indivision India Partners, manages a fund that focuses on providing growth capital to businesses which benefit from the growth in consumption in the Indian sub-continent. — Sucheta Dalal